The IMF has approved the second tranche of $452 million.
The Fund held an executive board meeting in Washington DC where it evaluated Pakistan’s economic progress. It then approved the release of the second tranche as part of the $6 billion loan programme.
Pakistan received approximately $1 billion as part of the first tranche. Under the IMF programme, Pakistan has to make major changes to its economic policy and taxation system. It has already increased the prices of gas and electricity and raised taxes on other things.
This higher tax regime is part of the IMF’s economic strategy that Pakistan agreed to when it entered the IMF programme.
“Pakistan’s program is on track and has started to bear fruit. However, risks remain elevated. Strong ownership and steadfast reform implementation are critical to entrench macroeconomic stability and support robust and balanced growth,” read the IMF statement.
“The authorities are committed to sustaining the progress on fiscal adjustment to place debt on a downward path. The planned reforms include strengthening tax revenue mobilization, including the elimination of tax exemptions and loopholes, and prudent expenditure policies. Preparations for a comprehensive tax policy reform should start early to ensure timely implementation. Enhanced social safety nets will help alleviate social costs and build support for reforms.”
The IMF also noted that Pakistan will need to fulfil a number of conditions to get off the FATF’s Grey List. To do this, it must address shortcomings in its policies, it said.
It also stressed on the importance of faster progress on anti-money laundering and terrorism financing. “Faster progress is needed to improve the AML/CFT framework, supported by technical assistance from the IMF and other capacity development providers. Swift adoption of all the necessary measures is needed to exit the FATF’s list of jurisdictions with AML/CFT deficiencies.”
“Efforts are ongoing to further improve the business environment, strengthen governance, and foster private sector investment. Reform of the state-owned enterprise sector will help put Pakistan’s public finances on a sustainable path and have positive spillovers by leveling the playing field and improving the provision of services.”